Public Homepage - Construction Claims Advisor

Recent Issues

EDITOR'S NOTES | Issue 8-10 (in: Volume 8 - Number 10 | March 8, 2010): Most construction contracts address the issue of excusable weather delay. Typically, the contractor is allowed an extension of the performance period, but is not entitled to an increase in the contract price. The contract may expressly disclaim any recovery for delay, disruption or acceleration caused by natural occurrences.

As explained in a recent case, a Florida project was plagued by multiple hurricanes. In the aftermath of the storms, a shortage of labor and materials gave rise to escalated costs. The contractor sought reimbursement for the increased costs. The project owner responded that this was a fixed-price contract, which expressly disclaimed owner responsibility for increased costs caused by natural occurrences. The contractor said it was not seeking delay damages. The claim was for cost escalation, an item not expressly disclaimed under the contract. A federal appeals court was asked to sort out the dispute.

Other cases reported this week involved a contractor's commercial general liability insurance coverage and a project owner's right to sue its former architect for negligence. The contractor's award of a subcontract was not the type of "intentional act" that would exclude insurance coverage for property damage caused by the subcontractor. And the project owner, having allowed its rights under the architectural agreement to lapse, could not later sue the architect for professional negligence.

CONTRACTOR DENIED COMPENSATION FOR STORM IMPACT ON LABOR AND MATERIAL COSTS (in: Volume 8 - Number 10 | March 8, 2010): A “Force Majeure” clause in fixed-price contracts prohibited a price increase due to natural occurrences. The disclaimer was not limited to delay damages but also applied to escalation in the cost of labor and materials.

SUBCONTRACTING DID NOT LEAD TO INSURANCE EXCLUSION (in: Volume 8 - Number 10 | March 8, 2010): The awarding of subcontracts was not the type of intentional act that would exclude coverage under a contractor’s commercial general liability insurance policy.

OWNER’S REMEDY AGAINST ARCHITECT RESTRICTED TO CONTRACT TERMS (in: Volume 8 - Number 10 | March 8, 2010): When a contract exists between a project owner and a design professional, the owner’s only remedies are under that contract. An owner could not sue its architect for purely economic losses allegedly caused by professional negligence.

EDITOR'S NOTES | Issue 8-9 (in: Volume 8 - Number 9 | March 1, 2010): Project owners usually reserve the right, under the terms of a construction contract, to terminate the contract without cause. This termination for convenience provides needed flexibility, allowing the owner to respond to contingencies such as diminished financing or changing market conditions. The contractor that is not in default is compensated for all work performed prior to termination, plus reasonable "settlement costs" incurred in closing out the contract.

Project owners are sometimes tempted to use a termination for convenience to gain tactical advantage in claim situations. An example is found in a recent case in which a contractor sought payment at the contract price for a quantity overrun. The government agency responded with a termination for convenience and tried to pay the contractor for the overrun at cost plus a reasonable profit, an amount considerably less than called for under the contract. The owner was not allowed, however, to subvert the contract price in this manner.

Other cases reported this week involve the scope of partial lien waivers and a contractor's default for failing to assure timely completion. The lien waivers, submitted in support of applications for progress payments, were interpreted to waive claims for extra work and delay damages, not just payment for the contractual scope of work. And, the default termination was upheld despite the contractor's numerous revisions to its progress schedule.

TERMINATION FOR CONVENIENCE DID NOT AFFECT CONTRACT PRICE ADJUSTMENT (in: Volume 8 - Number 9 | March 1, 2010): Under the terms of a contract, a contractor was entitled to a price adjustment based on actual quantities of work performed. The government could not use a termination for convenience to disregard the contract unit prices and compensate the contractor only for costs plus profit.

PARTIAL LIEN WAIVERS APPLIED TO EXTRA WORK AND DELAY DAMAGES (in: Volume 8 - Number 9 | March 1, 2010): Waiver and release forms signed in conjunction with applications for progress payments were not limited to the contractual scope of work. The release applied to claims for extra work and delay damages.